Showing papers in "Small Business Economics in 1999"
TL;DR: In this article, the authors synthesize disparate strands of literature to link entrepreneurship to economic growth by investigating the relationship between entrepreneurship and economic growth using elements of various fields: historical views on entrepreneurship, macroeconomic growth theory, industrial economics (Porter's competitive advantage of nations), evolutionary economics, history of economic growth (rise and fall of nations) and the management literature on large corporate organizations.
Abstract: In the 1980s stagflation and high unemployment caused a renewed interest in supply side economics and in factors determining economic growth. Simultaneously, the 1980s and 1990s have seen a reevaluation of the role of small firms and a renewed attention for entrepreneurship. The goal of this survey is to synthesize disparate strands of literature to link entrepreneurship to economic growth. This will be done by investigating the relationship between entrepreneurship and economic growth using elements of various fields: historical views on entrepreneurship, macro-economic growth theory, industrial economics (Porter's competitive advantage of nations), evolutionary economics, history of economic growth (rise and fall of nations) and the management literature on large corporate organizations. Understanding the role of entrepreneurship in the process of economic growth requires the decomposition of the concept of entrepreneurship. A first part of our synthesis is to contribute to the understanding of the dimensions involved, while paying attention to the level of analysis (individual, firm and aggregate level). A second part is to gain insight in the causal links between these entrepreneurial dimensions and economic growth. A third part is to make suggestions for future empirical research into the relationship between (dimensions of) entrepreneurship and economic growth.
2,395 citations
TL;DR: In this article, the authors used up-to-date financial panel data, and investigated the capital structure of small and medium sized enterprises (SMEs) in the UK.
Abstract: This article utilises up-to-date financial panel data, and investigates the capital structure of small and medium sized enterprises (SMEs) in the UK Different capital structure theories are reviewed in order to formulate testable propositions concerning the levels of debt in small businesses, and a number of regression models are developed to test the hypotheses
903 citations
TL;DR: In this article, the authors deal with the explanation of variations in the growth between New Technology-based Firms (NTBFs) and non-innovative firm foundations.
Abstract: This paper deals with the explanation of variations in the growth between New Technology-based Firms (NTBFs) and non-innovative firm foundations. Based on theoretical models explaining the growth of firms, hypotheses on potential determinants are derived. The regression results indicate strong correlations between the growth rate on the one hand and firm-specific, founder-specific as well as external factors on the other. These factors influence the growth rates of innovative and non-innovative young firms in different ways. Furthermore, based on the results of multivariate regressions, NTBFs achieve on average higher growth rates than non-innovative firm foundations. Moreover, the net employment effect of those NTBFs founded in 1989/90 is positive. This does not hold for non-innovative young firms, in which the number of jobs destroyed by closures and shrinking firms is larger than the number of new jobs in growing and expanding firms.
547 citations
TL;DR: In this paper, the extent to which social capital is advantageous to small and medium enterprise (SME) growth is explored, and the advantages of social capital to SMEs are explored.
Abstract: The paper explores the extent to which social capital is advantageous to small and medium enterprise (SME) growth Social capital is a communal property involving civic engagement, associational membership, high trust, reliability and reciprocity in social networks It is capable of being identified in social, political and economic contexts, often associated with strong communities However, not all strong communities exert the effects of social capital in respect of business activities This paper assesses government programmes to promote collaboration amongst SMEs for improving innovation capacity by increasing social capital through networking It shows that, for a sizeable proportion of programme-funded firms in Denmark, Ireland and Wales (UK) social capital building was associated with enhanced business, knowledge and innovation performance Of particular importance was the opportunity afforded to firms for linkage with external innovation networks, and the build-up of embeddedness, or the institutional basis for the enhancement of social capital As a consequence of discovering the advantages of social capital, over a third of respondents planned to continue to develop it in future, in many cases funding such activities privately rather than calling on the public purse
484 citations
TL;DR: In this article, the authors present a resource-based view of an SME's sustainable competitive advantage and propose an approach to strategy analysis based on such a view, which can be used to support strategic analysis and management in SMEs.
Abstract: Few articles have been published that specifically deal with how to support strategic analysis and management in small-medium sized enterprises (SMEs). In the last decade, however, literature on strategic management has paid considerable attention to the resource-based theory, which seems to fit well the needs of owners and executives of SMEs. The objective of this article is twofold: (i) to present a resource-based view of an SME's sustainable competitive advantage; (ii) to propose an approach to strategy analysis based on such a view.
350 citations
TL;DR: In this article, the authors identify three generic strategies for SMEs taking into account explicitly their resource disadvantage and show that SMEs can free-ride on the bigger firm's market development efforts and/or they can form strategic alliances to force accommodation by the bigger rivals.
Abstract: This paper identifies three generic strategies for SMEs taking into account explicitly their resource disadvantage. In addition to the much advocated niching strategy, we show that SMEs can free-ride on the bigger firm's market development efforts and/or they can form strategic alliances to force accommodation by the bigger rivals. Contrary to conventional arguments, we show that success in niching is not conditional upon the continued ignorance of the niche by the bigger firms. It is also not true that the SMEs must have a cost advantage vis-a-vis the bigger firms in order to niche or to free-ride successfully. The bigger firms faced with entry into their markets by SMEs encounter the classical chain-store paradox. The three generic strategies proposed here are designed to force accommodation by the bigger firms.
158 citations
TL;DR: The authors investigated the effect of a spouse's self-employment experience on the probability that his spouse will become self-employed and found that having a spouse with some exposure to self employment nearly doubled the probability of a woman becoming a self-employee.
Abstract: This paper investigates the effect of a husband's self-employment experience on the probability that his wife will enter self-employment. Results suggest that having a husband with some exposure to self-employment nearly doubles the probability that a woman will become self-employed, all else equal. Further, the effect is found to be strongest if a woman's husband is actually self-employed at the time she is contemplating a transition. Having a husband with prior self-employment experience also has an important yet quantitatively smaller effect. A series of robustness checks suggest that family businesses and assortative mating only partially explain this large effect. Intrahousehold transfers of human (and, to a much lesser degree, financial) capital might also play a role.
157 citations
TL;DR: In this article, a simple structural model relating small business performance to firms' market position and the characteristics of their owner-managers is developed, focusing on two questions: What determines firms' choice of business strategy? And, how does strategy choice change subsequent business performance?
Abstract: This paper develops a simple structural model relating small business performance to firms' market position and the characteristics of their owner-managers. Attention focuses on two questions: What determines firms' choice of business strategy? And, how does strategy choice change subsequent business performance? Taking into account both relationships, the paper examines the links between the performance of a large group of Irish small businesses over the 1993--94 period and their market and owner-managers' characteristics in 1991. The analysis suggests three main empirical results. First, firms' turnover growth and return on assets are only weakly related in the short-term; above average growth rates are therefore no guarantor of high profitability. Moreover, a number of characteristics of firms' market position and their owner-managers are found to have the opposite effects on profitability and growth rates. Secondly, our data provides no evidence of the persistence of turnover growth rates above or below the average. Above average profit rates were also found to persist only in the very short term. Thirdly, small firm performance is shown to depend strongly on strategy choice, with turnover growth being particularly strategy dependent. This highlights the importance for small firms of making the correct strategy choices, a point emphasised by the negative profitability and growth effects of some strategy choices. One strategy choice that had positive effects on both profitability and growth was the development of new export markets.
157 citations
TL;DR: In this paper, the authors analyze the relationship between business dynamics in manufacturing and the growth of total factor productivity in industries and regions, and they show that both entry and exit rates contribute positively to the growth in the industries and in regions.
Abstract: High rates of firm births and deaths are a pervasive phenomenon across industries and territories. Most studies have related the great turbulence at the fringe of practically all manufacturing industries to positive effects on the long-run performance of industries. According to these views business turbulence, although it has a relatively small incidence on net entry, leads to allocative improvement and stimulates innovation. The existing set of empirical studies does not reach clear conclusions, however, and many questions are still open. Our contribution analyses the relationship between business dynamics in manufacturing and the growth of total factor productivity in industries and regions. After a review of current literature on entry and exit it is argued that most models are tailored to suit the processes observed in industries and regions that are near the technological frontier, and we propose an approach that could be more representative of middle range economies such as Spain. According to this approach new firms are seen more as users of innovations than producers of innovations. We adopt a model based on a vintage capital framework in which new entrants embody the edge technologies available and exiting businesses are supposed to represent the most marginal obsolete plants. Both industries and regions are represented by a Hall's type production function which controls for imperfect competition and economies of scale. The results show that both entry and exit rates contribute positively to the growth of total factor productivity in industries and in regions.
137 citations
TL;DR: In this article, the authors focus on the empirical assessment of determinants and effects of financing constraints at the firm level using a standard model of credit rationing based on asymmetric information firm age and size.
Abstract: This paper focuses on the empirical assessment of determinants and effects of financing constraints at the firm level. Using a standard model of credit rationing based on asymmetric information firm age and size are found to be factors which should influence the probability of financing constraints. Improving business conditions strengthen the degree of informational asymmetry. A unique panel of firm data for Germany, including direct information on financing constraints, is used for the econometric analysis. Firms' size and improving business conditions are found to have a significant effect. Furthermore, a significant impact on investment and R&D expenditures cannot be rejected.
129 citations
TL;DR: In this article, the authors analyzed motives and cost effects of small-scale mergers in German banking and showed that positive scale and scope effects from a merger arise only if the merged unit closes part of the former branch network.
Abstract: Based on an unbalanced panel of all Bavarian cooperative banks for the years of 1989--97, which includes information on 283 mergers, we analyze motives and cost effects of small-scale mergers in German banking. Estimating a frontier cost function with a time-variable stochastic efficiency term, we show that positive scale and scope effects from a merger arise only if the merged unit closes part of the former branch network. When we compare actual mergers to a simulation of hypothetical mergers, size effects of observed mergers turn out to be slightly more favorable than for all possible mergers. Banks taken over by others are less efficient than the average bank in the same size class, but exhibit, on average, the same efficiency as the acquiring firms. For the post-merger phase, our empirical results provide no evidence for efficiency gains from merging, but point instead to a leveling off of differences among the merging units.
TL;DR: In this article, the authors studied the evolution of the size distribution of firms over time in Sweden for a period spanning from the late 1960s to the early 1990s, and concluded that the conditions have been unfavorable for small firms, and hence that too few small firms have managed to grow out of the smallest size classes.
Abstract: In this paper it is argued that the size distribution of firms may largely be deter- mined by institutional factors. This hypothesis is tested in an exploratory fashion by studying the evolution of the size distribution of firms over time in Sweden for a period spanning from the late 1960s to the early 1990s. The data used is divided into finer size classes compared to most previous studies. This gives more scope for investigating the impact of institutions. Moreover, we use a unique data set, starting in 1984, to take account of corporate groups and government ownership. The analysis shows a poor development for intermediate-sized (10- 199 employees) firms. This is likely to reflect the existence of a threshold that many firms are either unwilling or unable to cross. The analysis of the institutions and rules of the game determining the entrepreneurial and business conditions in Sweden indicate that the conditions have been unfavorable for small firms, and hence that too few small firms have managed to grow out of the smallest size classes. The conclusion is supported by an international comparison of the number of firms in different size classes. Data indicate that Sweden has fewer small (10-99 employees), and more large (500+) firms per capita than other European countries.
TL;DR: In this paper, the authors developed a multivariate model along the lines of small business economics but including cultural and social variables to understand the factors influencing South Asian entrepreneurial growth in Britain, and found that moving away from a style of management based on immigrant culture has a positive impact on growth.
Abstract: This paper aims to contribute to our understanding of the factors influencing South Asian entrepreneurial growth in Britain. It develops a multivariate model along the lines of small business economics but includes cultural and social variables. The theoretical model specified assumes that cultural factors have an augmenting effect on socio-economic factors. A distinction is also drawn between initial entrepreneurial characteristics and later expansion strategies used. The empirical model, based on the general-to-specific approach, can explain almost 60 per cent of entrepreneurial growth. The results suggest that moving away from a style of management based on immigrant culture has a positive impact on growth. This requires greater delegation of responsibilities to non-family employees. At the same time, strengthening links with the country of origin has a positive impact on growth. While the commitment to work hard at start-up is essential, human capital factors like the entrepreneur's educational attainment and employee training appear to be more crucial than financial resources in contributing to growth.
TL;DR: In this paper, the authors point out the importance of harnessing attitudes to attributes for generating a high rate rate of entry into self-employment, pointing out that the acquisition of "social" attributes that relate to family formation, and the welding of the family into a cohesive economic unit, are at least as important as those attributes, like education, which relate purely to the individual.
Abstract: The central issue addressed in this paper is encapsulated in the fact that many Indians, but relatively few black Caribbeans, are self-employed in Britain. This paper suggests two factors: first, black Caribbeans were "ethnically disinclined" to enter business; second, they did not posses the attributes that were positively related to entering business. Using data from the 1991 Census, this paper pinpoints how much of the observed paucity of self-employed black males in Britain was use to ethnic disinclination and how much was due to attribute disadvantage. More generally, it points to the importance of harnessing attitudes to attributes for generating a high rate rate of entry into self-employment. In this context, the acquisition of "social" attributes that relate to family formation, and the welding of the family into a cohesive economic unit, are at least as important as those attributes, like education, which relate purely to the individual.
TL;DR: In this paper, the authors formulate a general method of identifying clusters of economic activity in a country or region based on generally available industry data and do not start from a priori notions of geographic or technology clusters.
Abstract: The purpose of the present paper is twofold. First, we formulate a general method of identifying clusters of economic activity in a country or region. The methodology is based on generally available industry data and does not start from a priori notions of geographic or technology clusters. Second, the proposed methodology is then used to identify the main clusters of economic activity in Ohio and Sweden and their evolution over the last twenty years.
TL;DR: In this article, the role of small and medium-sized enterprises (SMEs) in e-commerce has been explored, and the importance of network externalities and institutional factors affecting trust and the relationships among different economic actors has been highlighted.
Abstract: This paper explores three inter-related issues: globalisation; the role of small and medium sized enterprises (SMEs); and electronic commerce (e-commerce) A central question is whether e-commerce offers advantages to SMEs that may facilitate their access to global markets and help them overcome the disadvantages they face vis-a-vis large transnational corporations (TNCs)? The paper starts by briefly considering the extent of globalisation and its relationship to free trade We then go on to consider recent developments in e-commerce, focusing on the key issue of e-payment systems Differences in the requirements of large and smaller firms are identified, and we identify a number of key issues concerning access of smaller firms to e-payment systems and the (virtual) market place, and outline their implications for regulatory policy Our analysis highlights the importance of network externalities, and institutional factors affecting trust and the relationships amongst different economic actors This leads to a consideration of networking and public policies more broadly One of the central conclusions of our analysis is that there are important synergies between e-commerce (virtual) networks and (real) production networks This suggests that policy makers and smaller firms should think in terms of extending existing, and catalysing new, real production networks to incorporate e-payment systems for networks of firms in order to facilitate their access to virtual markets
TL;DR: In this paper, the authors analyzed owner departure for a nationwide sample of small businesses owned by Asian Indian and Filipino immigrants and a comparison group of Asian non-immigrant firm owners, finding that highly educated Asian immigrant owners are more likely than others to exit self-employment over the 1987-1991 period.
Abstract: Part of the uniqueness of the immigrant Asian business community in the U.S. lies in the fact that many among the highly educated pursue self-employment in small-scale, low-yielding retail and personal service fields. This study analyzes owner departure for a nationwide sample of small businesses owned by Asian Indian and Filipino immigrants and a comparison group of Asian nonimmigrant firm owners. Controlling for firm and owner traits, highly educated Asian immigrant owners are more likely than others to exit self-employment over the 1987--1991 period; exit from traditional fields (retail and personal services) is pronounced. These exit patterns do not typify the comparison group. Findings are consistent with the hypothesis that self-employment is often a form of underemployment among Asian immigrants.
TL;DR: In this article, the authors analyze how various control mechanisms are fit to reduce this information problem and how various types of capital suppliers are endowed to finance small business enterprises, and how these control mechanisms can be used to identify the default risk associated with a borrower or have control over a borrower's investments.
Abstract: As the amount of information about an enterprise is generally not neutral with respect to firm size, financiers have problems to identify the default risk associated with a borrower or to have control over a borrower's investments. This review paper analyses how various control mechanisms are fit to reduce this information problem and how various types of capital suppliers are endowed to finance small business enterprises.
TL;DR: This paper showed that establishment dissolution declines with age and that age at dissolution differs for broad industry and geography groups, establishment affiliation status, and establishment size, based on age-specific dissolution ratios and establishment life tables calculated for select establishment sub-populations.
Abstract: This study shows that establishment dissolution declines with age and that age at dissolution differs for broad industry and geography groups, establishment affiliation status, and establishment size. These findings, largely confirming results presented elsewhere, are drawn from age-specific dissolution ratios and establishment life tables calculated for select establishment sub-populations. The paper uses Bureau of the Census Standard Statistical Establishment List datasets, a census of establishments with employment for the United States for the 1987 and 1988 years.
TL;DR: In this article, the authors show that during the period under observation (January 1991-June 1995) the number of firms nearly doubled and in 1995, nearly 50% of all jobs were to be found in firms established after 1991.
Abstract: The unification of both Germanies and the introduction of the market economy in eastern Germany came as a shock to existing firms and led to an enormous boom in the establishment of new firms. The first section of this paper shows that during the period under observation (January 1991--June 1995) the number of firms nearly doubled and in 1995, nearly 50% of all jobs were to be found in firms established after 1991. Shortly after unification, a kind of "start- window" existed during which the conditions for establishment, growth and survival of firms were extraordinarily good. The next section deals with the determinates of the growth of these newly founded firms. Most determinants have been selected on the basis of the most recent studies by Bruderl, Preisendorfer and Ziegler (1996), and Storey (1994). The analysis included not only establishment characteristics but also strategic factors such as the technological status of the establishment, the proportion of sales in interregional markets, and a corporate competitive strategy indicator. A comparison of these results with other studies shows that the determinants that affect employment growth in new firms in eastern German are apparently the same as in western Germany and Britain, albeit to different extents.
TL;DR: In this paper, the authors examined the determinants of short run employment growth in very small firms in the Services sector and found evidence of non linearities in the growth-size relationship, and argued that these nonlinearities reflect the short run constraints that small firms face in adjusting to demand shocks.
Abstract: This paper examines the determinants of short run employment growth in very small firms in the Services sector. The study shows evidence of non linearities in the growth-size relationship, and it is argued that these non linearities reflect the short run constraints that small firms face in adjusting to demand shocks. The paper also suggests that there are other systematic influences on growth apart from size. The paper draws on survey evidence from the Northern Region of the United Kingdom.
TL;DR: In this article, the authors present new evidence on the determinants of firm exits that occurred in Japanese manufacturing industries over the period 1981--1989, and use the gross-number measure for exits.
Abstract: This paper presents new evidence on the determinants of firm exits that occurred in Japanese manufacturing industries over the period 1981--1989. Gross-number measure is used for exits. Many structural factors have exerted a definite influence on the extent of exit; across industries, capital intensity and subcontracting relationships have an exit-promoting effect, while profits, industry growth, concentration, and R&D opportunity have a negative relationship with exit. In addition, the minimum efficient size has an inverted-U-shaped relationship. However, export opportunity has only a marginal effect. These results are likely to reflect exits of small business.
TL;DR: In this paper, the authors used three surveys of graduates' and undergraduates' evaluations and perceptions of the conditions of work in small and medium-sized enterprises (SMEs) in the U.K.
Abstract: This paper uses three surveys of graduates' and undergraduates' evaluations and perceptions of the conditions of work in small and medium-sized enterprises (SMEs) in the U.K. The first survey addresses the relationship between the actual career profiles of graduates and their perceptions of work in small vis-a-vis large companies. The second survey is a large-scale national study of U.K. graduates' employment patterns. The third survey asked undergraduates how they expected working conditions might differ across firm size. The distribution of graduates across firm size is presented; this shows graduates to be disproportionately employed in larger firms. The work of graduates across firm size is then described in terms of earnings; work bargaining and fringe benefits; training and the internal labour market; and the work environment. For each facet, perceptions about work conditions are also explored. The evidence shows the working conditions for graduates are lower quality in SMEs and that graduates broadly perceive this to be the case. The implications for policies which overlook these conclusions are discussed.
TL;DR: In this article, the authors investigated the performance of the micro firm in the early years of its life cycle, by reference to four key behavioural characteristics: strengths, weaknesses, opportunities and threats (SWOT) analysis; gathering of trade intelligence on the firm's rivals; use of information technology (IT) in the business; and financial form and the owner-manager's preferences as regards the form of their equity stake holding.
Abstract: This paper is an empirical study, making appeal to firsthand evidence gathered by face-to-face interviews with the owner-managers of 150 small firms in Scotland. It investigates the performance of the micro firm in the early years of its life cycle, by reference to four key behavioural characteristics: (i) strengths, weaknesses, opportunities and threats (SWOT) analysis; (ii) the gathering of trade intelligence on the firm's rivals; (iii) the use of information technology (IT) in the business; and (iv) financial form and the owner-manager's preferences as regards the form of their equity stake holding. Seven propositions, based on the evidence accumulated, are formulated, and tested. These are illustrated by boxplots and cross-tabulations, and supported with chi-square statistics for testing measures of association. Taken together, the data provide an illuminating picture of the strategic behaviour of the young micro firm, and the subsequent effect that actions can have on firm performance. In particular, it is found that the use of IT in clusters of devices has a highly significant positive association with performance.
TL;DR: In this article, the authors examined the investment criteria employed by Venture Capital Firms (VCs) in Singapore and found that VCs in Singapore VCs are not very different from those adopted by VC firms in other countries including U.S. The results also confirmed that the entrepreneur's characteristics or the top management's capabilities are primary indicators of the venture's potential.
Abstract: The Venture capital (VC) industry in Singapore is of recent origin. However, funds under management in Singapore have grown from S$45 million in 1983 to S$7.86 billion in 1996. These developments together with the recent announcement of government's vision of Singapore becoming a hub for venture capital in the region provide an opportunity for an examination of the venture capital industry in Singapore. The VC industry originated in the Western Hemisphere in response to the need for risk capital for high technology industries. In the light of the differences in investment opportunities around Singapore, and the nature of industrial developments in South East Asia in general, the authors anticipated that the investment criteria employed by Venture Capital Firms (VCs) in Singapore would differ. The results however reveal that criteria adopted by Singapore VCs are not very different from those adopted by VCs in other countries including U.S. The results also confirm that the entrepreneur's characteristics or the top management's capabilities are seen as being primary indicators of the venture's potential. Further examination of VCs investment process revealed that the investment criteria adopted by successful VCs were no different from those adopted by less successful VCs. This confirms that investment selection is a multi-stage process wherein venture assessment is only one of the steps in this process. Before VCs evaluate a venture they screen investment proposals based on their investment preferences or investment strategies. VCs in our sample had definite ideas about where to invest and in what types of firms. How do VCs select appropriate investment strategies, however, has not been adequately dealt in the literature and is a fitting subject for further studies.
TL;DR: In this paper, the authors examined the effect of market and corporate structure on the extent of innovation for a sample of circa 300 manufacturing plants located in Scotland and found that corporate structure influences are more important in determining the number of innovations than market structure and barrier to entry variables.
Abstract: This paper examines the effect which market and corporate structure have on the extent of innovation for a sample of circa 300 manufacturing plants located in Scotland. Innovation is defined as the introduction of a commercially significant new product at the establishment level. The theoretical model of Geroski (1990) is extended to incorporate plant- level variables such as size, multiplant operation, the presence of R&D facilities and external/indigenous ownership. A distinction is made between the direct and indirect effects of these variables. Negative binomial estimations indicate that corporate structure influences are more important in determining the number of innovations than market structure and barrier to entry variables. Plant size, foreign ownership and the presence of R&D are all positively associated with innovation. Direct effects greatly outweigh indirect effects. Tobit estimations on the number of innovations per employee support the findings of Acs and Audretsch (1988) that smaller enterprises are more innovation intensive than larger enterprises, at least up to a limit of around 1200 employees. The positive effect of R&D arises principally from increasing the probability of a plant becoming an innovator, rather than from making a plant more innovation intensive. By contrast, the importance of size lies principally in encouraging further innovations among plants which are already innovators, but less than proportionately with the increase in employment size.
TL;DR: In this article, the authors show that German small firms' R&D activity relative to that in the U.K. and Germany may be under-estimating the true level by 13.9 per cent and 2.4 per cent, respectively.
Abstract: There is a widely recognised tendency for conventional measures of R&D activity to under-estimate the R&D investments of small companies. This arises due to small firms' emphasis on developmental rather than fundamental research, and because this activity is often informally organised. International survey evidence suggests a greater degree of formality in the organisation of R&D in German small firms. This reduces the likely degree of under-estimation of German small firms' R&D activity relative to that in the U.K. As a result, aggregate R&D figures may be under-estimating the true level by 13.9 per cent in the U.K. and 2.4 per cent in Germany. This is equivalent to around half of the historical difference between aggregate levels of business R&D in the U.K. and Germany.
TL;DR: In this article, an investigation of the life history of three cohorts of exits based on longitudinal data covering the population of all manufacturing firms in a German federal state reveals three empirical regularities: (1) Although the probability of exit tends to decline with age ceteris paribus, only about a quarter of all exits is from the group of young firms aged five years or less.
Abstract: An investigation of the life history of three cohorts of exits based on longitudinal data covering the population of all manufacturing firms in a German federal state reveals three empirical regularities: (1) Although the probability of exit tends to decline with age ceteris paribus, only about a quarter of all exits is from the group of young firms aged five years or less. (2) Only a minor fraction of exits lived through a period of continous decline of employment for five years or more before closing down. (3) The "impact effect" of job loss due to exits can differ sharply from the "long run effect".
TL;DR: In this paper, the authors analyzed the effect of information asymmetry in capital market imperfections on the investment behavior of Korean firms and found that the sensitivity of investment to cash flow will be higher during the period before initial public offering (IPO) than after IPO.
Abstract: Capital market imperfections, such as information asymmetry, increase the cost of external funds compared to that of internal funds. This phenomenon creates financing constraints limiting the availability of external funds and making corporate investment excessively sensitive to cash flow. This study analyzes the effect of financing constraints on the investment by comparing the financial behavior of Korean firms before and after their stocks are newly listed on a stock exchange. The results show that the sensitivity of investment to cash flow will be higher during the period before initial public offering (IPO) than after IPO. In particular, the effect of financing constraints relaxation by IPO is more prominent in small than in large manufacturing firms.
TL;DR: In this paper, the entrepreneur within a new small firm is regarded as taking complex rather than simple actions, which determine whether he or she will remain in business, instead of simply choosing output, as in the standard analysis of the competitive firm, the entrepreneur may take actions which involve choices about markets, finance, organisation, innovation, and much else besides.
Abstract: In this paper, the entrepreneur within the new small firm is regarded as taking complex rather than simple actions, which determine whether he or she will remain in business. Thus, instead of simply choosing output, as in the standard analysis of the competitive firm, the entrepreneur may take actions which involve choices about markets, finance, organisation, innovation, and much else besides. To explore this approach, very detailed information on actions within small firms is required. It is shown how this was obtained by a fieldwork study of new business starts. Using data from this fieldwork, a rich statistical picture was created of actions within the new small firm. In turn this permitted econometric analysis of actions that help a new small firm to stay in business over a three year period. This indicates that the crucial actions which enable a small firm to stay in business are: the rapid repayment of debt and the willingness to sacrifice short-run profit for growth. There is also evidence that staying in business is fostered by tight control of the wage bill, especially by substituting other labour inputs for full time employees.